FOR
IMMEDIATE RELEASE
SARDAR
BIGLARI ISSUES LETTER TO SHAREHOLDERS OF
THE
STEAK N SHAKE COMPANY
SAN
ANTONIO, TX – January 23, 2008 – Sardar Biglari, Chairman and
Chief Executive Officer of Western Sizzlin Corporation (OTC Bulletin Board:
WSZL) and The Lion Fund, LP, issued the following letter today to the
shareholders of The Steak n Shake Company (NYSE: SNS):
Dear
Fellow Shareholders:
I
would
like to outline our plans to create value for all shareholders of The Steak
n
Shake Company as well as explain why we believe it is absolutely essential
to
implement this proposal. Over the last decade — an ample period of
time to judge long-term performance — the members of the current board have had
their chance to amass value for you. They have failed. The 2008 annual
meeting
of shareholders is your first opportunity to vote for directors not allied
with
the current board. Therefore, to rectify the errors committed by the present
board, Philip L. Cooley, my fellow nominee, and I are looking to replace
the
majority of the board with a new slate of directors. Our plan is to obtain
two
board seats at the next annual meeting and then call a special meeting
to vote
on replacing most of the board. This letter is intended to impart our philosophy
and plans for the company — information that we would want to know if our roles
were reversed. We urge you to read this crucial letter in its entirety
and then
to support us when we send you our proxy materials. Your vote — and, in fact,
every vote — matters.
Maximizing
Intrinsic Value Per Share. The value of an asset, including Steak n
Shake’s common stock, is derived from its future cash flows and is referred to
as its intrinsic value. This intrinsic value is computed by taking all
future
cash flows into and out of the business and then discounting the resultant
number at an appropriate interest rate. Maximizing intrinsic value per
share
must be the long term objective of Steak n Shake, for doing so will lead
to
maximization of shareholder wealth.
Unfortunately,
the leaders of Steak n Shake have destroyed shareholder value. Plainly,
it is
time to change the current board as soon as possible — our first priority — to
avoid further destruction. Our second priority is for the company to begin
to
implement certain strategic initiatives we would recommend that can create
substantial and sustainable shareholder value. The reasons underlying these
imperatives are that the record clearly shows how poorly management has
reinvested stockholders’ money. In quantifiable terms, during the last ten years
they have spent approximately $566 million in capital, yet operating profit
declined and negative shareholder returns were produced! An examination
of the figures reveals that the stock price in 1998 rose as high as $18.75
but
now sits at $7.65 for a loss of almost 60%, notwithstanding the time value
of
money.
|
Steak
n Shake’s Capital Allocation Record
($
in thousands)
|
| |
1998
|
|
1999
|
|
2000
|
|
2001
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
|
10
Yr. Change
|
|
Revenues
|
$295,944
|
|
$350,879
|
|
$408,686
|
|
$445,191
|
|
$459,014
|
|
$499,104
|
|
$553,692
|
|
$606,912
|
|
$638,822
|
|
$654,142
|
|
$358,198
|
|
Growth
per Yr.
|
–
|
|
18.6%
|
|
16.5%
|
|
8.9%
|
|
3.1%
|
|
8.7%
|
|
10.9%
|
|
9.6%
|
|
5.3%
|
|
2.4%
|
|
–
|
|
Pre-tax
Profit
|
$ 32,850
|
|
$ 30,602
|
|
$ 33,204
|
|
$ 32,366
|
|
$ 36,044
|
|
$ 32,424
|
|
$ 42,438
|
|
$ 44,444
|
|
$ 42,292
|
|
$ 14,871
|
|
($17,979)
|
|
Growth
per Yr.
|
–
|
|
(6.8%)
|
|
8.5%
|
|
(2.5%)
|
|
11.4%
|
|
(10.0%)
|
|
30.9%
|
|
4.7%
|
|
(4.8%)
|
|
(64.8%)
|
|
–
|
|
%
of Revenues
|
11.1%
|
|
8.7%
|
|
8.1%
|
|
7.3%
|
|
7.9%
|
|
6.5%
|
|
7.7%
|
|
7.3%
|
|
6.6%
|
|
2.3%
|
|
(8.8%)
|
|
Capital
Expenditures
|
$ 51,430
|
|
$ 66,974
|
|
$ 75,765
|
|
$ 39,910
|
|
$ 41,351
|
|
$ 30,707
|
|
$ 46,278
|
|
$ 63,622
|
|
$ 80,840
|
|
$ 68,643
|
|
|
|
Cumulative
Capital Expenditures (10 Year Period):
$565,520
|
|
Source: As
Reported in SEC filings
|
The
company’s capital expenditures, approved by the board, have increased overall
sales, but the improvement in sales did not produce the level of profit
to
justify the investment, proving that the benefits were illusory. Sales
growth is
not tantamount to value growth. Growth at a competitive disadvantage
—
when cost of capital exceeds return on capital — decimates shareholder wealth.
Steak n Shake’s board has made the unsound decision of allowing management to
plow money back into low-return investments with the detrimental effect
of
lowering the price of the stock. Equally distressing, cumulative cash flows
over
the ten year period have been negative. Incidentally, management has
benefited from running a larger company with more company-operated restaurants,
but shareholders were denied the opportunity to reinvest their capital
into more
attractive, remunerative opportunities. We believe Steak n Shake shareholders
would have been better off financially had the capital been paid out in
cash
dividends. The faster Steak n Shake plans to grow, the more value it will
destroy. The board is getting a costly education: Sales growth does not
translate into shareholder value. Unfortunately, you, the shareholder,
are
paying the tuition.
We
are
not interested in lingering while waiting for improvement. We are financially
and psychologically committed to changing the strategic direction of the
Steak n
Shake Company. The metamorphosis requires much work. The first change is
to have
the right business principles and objectives in mind. Henceforth, if elected,
we
would focus the board and management on the generation of free cash flows
and
the judicious reinvestment of capital, which equates to maximizing the
value per
share of the company. A course correction must be instituted: to resist
reinvestment in store expansion unless the analysis shows that future returns
will be much higher than the past ones, or, better yet, superior to all
other
alternatives after compensating for the inevitable execution risk. Although
we
see substantial opportunity to create value by reinvesting in the core
business,
the company can no longer allocate capital without regard to opportunity
cost.
The leadership of the company must stop spending capital for growth and
begin investing it for profit. If intrinsic value per share
increases, the stock price will eventually follow suit.
Alan
Gilman has been Chairman and/or CEO during the past ten years, with
disappointing results. In the 2004 annual letter to shareholders, which
he
co-authored, he averred that “we are now preparing for accelerated expansion. We
will open more restaurants, at a pace that matches our ability to execute
effectively. With this systematic approach we believe that we can provide
a
strong return on each dollar that we invest and bring Steak n Shake to
a growing
number of raving fans.”
Mr.
Gilman did spend shareholders’ money — a lot of it — to the tune of about $70
million per year. But not only has Steak n Shake failed to display a “strong
return,” but rather each dollar reinvested has resulted in an overall decline in
the company’s market value.
After
years of low returns on capital and negative shareholder returns, Mr. Gilman
recently revealed in the company’s fourth quarter earnings conference call on
November 15, 2007 that Steak n Shake plans to open another nine restaurants
in
fiscal 2008. As board members, we would have advocated placing all attention
on
reversing deteriorating operating performance. He plans to spend $18-$22.5
million of your money when far more lucrative options to reallocate capital
on a
risk-adjusted basis exist. The bottom line: It is time to remove the checkbook
from Mr. Gilman and the current leaders of the company.
In
the
conference call, Mr. Gilman admits that “we have not been field focused for
several years, and we have not been core product focused in our marketing.…So
the problem has been that we have not focused on the field execution of
what
Steak n Shake is all about for a couple of years, and we’ve paid a price for
that in the last eight quarters of same-store sales difficulties, which
are
beyond what the macroeconomic picture would suggest.” We wonder where Mr. Gilman
has been throughout this period. Furthermore, since his resuming the position
of
Interim CEO in August 2007, his decisions have further diminished the value
of
the company. In the first quarter of fiscal 2008, same-store sales are
expected
to decline by 9.5%, and the firm will post an operating loss. Mr.
Gilman, it is time for you and your fellow directors to step down.
*************
Fiscal
Discipline Concerning Expenses. General and administrative (“G&A”)
spending must be limited to appropriate levels. The reduction in G&A should
become a part of the corporate culture at Steak n Shake to ensure that
resources
are allocated productively. Turnarounds cannot turn without cutting unneeded
overhead.
The
behavior of top leadership shapes the culture of the organization. At the
moment, Steak n Shake’s culture is the source of a competitive disadvantage. The
absolute is that the firm’s ethos ought to evince concern for the shareholder.
Disciplined restraint in capital reallocation begins at the head with leadership
constantly questioning and eliminating unnecessary projects or spending.
Equally
important is to take the savings from excess spending and reinvest these
funds
prudently. The maxim to save wisely and invest sensibly is imperative to
turn
Steak n Shake around so that once again it can become a thriving enterprise.
Regrettably, the current board and management have been undisciplined both
with
expenses and capital expenditures.
In
contrast, we would bring an entrepreneurial approach to the board. After
all, we
are one of the largest stockholders of the company with a financial interest
larger than that of the entire board. Thus, like true entrepreneurs, we
care how
your and our money is being spent. Once we would be voted in as directors,
we
would thoroughly examine the cost structure and advocate reduction of G&A by
eliminating wasteful outlays of capital. These actions should result in
higher
cash flows, representing in turn, a recognizable basis for a higher market
valuation. As I wrote you in my October 1, 2007 letter, “Corporate G&A costs
over the last five years have escalated from approximately $98,000 per
company-owned store to roughly $125,000 per unit. Just returning to past
G&A
levels — on a per unit basis — would save the company around $12 million
annually.” Since my letter to you, the company reported its full year results.
G&A per store for fiscal 2007 was approximately $132,000, which increases
the amount to be saved to $15 million.
It
is
appalling that the board would allow overspending to burden shareholders
so
dearly. Had G&A on a per unit basis remained the same over the last five
years, the company could have saved over $44 million. We believe our $15
million
estimate of savings is a realistic number because that amount will not
strain
the firm’s operations. Bottom line: Steak n Shake is in the penny-profit
business. The upshot is that a great deal of money has yet to be saved
at
headquarters and at the store level.
G&A
as a Percentage of Net Revenue and G&A Per Store
|
12
Months Ended
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
9/26/2001
|
|
|
9/25/2002
|
|
|
9/24/2003
|
|
|
9/29/2004
|
|
|
9/28/2005
|
|
|
9/27/2006
|
|
|
9/26/2007
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Revenue
|
|
$ |
445,191
|
|
|
$ |
459,014
|
|
|
$ |
499,104
|
|
|
$ |
553,692
|
|
|
$ |
606,912
|
|
|
$ |
638,822
|
|
|
$ |
654,142
|
|
|
SG&A
|
|
$ |
31,924
|
|
|
$ |
34,215
|
|
|
$ |
37,909
|
|
|
$ |
42,364
|
|
|
$ |
47,902
|
|
|
$ |
52,949
|
|
|
$ |
57,525
|
|
|
%
of Net Revenue
|
|
|
7.2% |
|
|
|
7.5% |
|
|
|
7.6% |
|
|
|
7.7% |
|
|
|
7.9% |
|
|
|
8.3% |
|
|
|
8.8% |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
G&A
Per Store
|
|
$ |
96
|
|
|
$ |
98
|
|
|
$ |
106
|
|
|
$ |
116
|
|
|
$ |
120
|
|
|
$ |
123
|
|
|
$ |
132
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No.
of Company-Owned Restaurants
|
|
|
332
|
|
|
|
348
|
|
|
|
356
|
|
|
|
365
|
|
|
|
399
|
|
|
|
429
|
|
|
|
435
|
|
Source: As
Reported in SEC filings
Strategy.
Steak n Shake’s previously announced initiatives, in our opinion, are
directionally off course and thus woefully inadequate. The most significant
problem that must be corrected is the continually deteriorating operating
performance of company-operated restaurants. Our plan would call
for a moratorium on the establishment of new
company-operated restaurants. New management must center on improving the
restaurants already in existence through better execution to make them
more
appealing to the customer and ultimately more profitable. The
lever
to maximize the value inherent in Steak n Shake is, in our view, to improve
restaurant-level operations. Additionally, unit economics must be attractive
for
the company and its franchisees. We have been puzzled by the board’s approving
the current strategic plan of opening restaurants when their return/risk
profile
has not been economically appealing. It’s far more lucrative to
increase
traffic at existing stores than to increase it by building new outlets.
Alongside better operational execution, the company should strategically
focus on growth through franchising.
The
future of Steak n Shake lies in franchising. Growth through franchising
is a
higher-return and lower-risk endeavor. Franchising represents a strategy
of
disciplined unit growth by leveraging the brand with market penetration
in a
manner that generates low-risk revenue and high-return cash flows. Such
a
long-range plan would yield numerous benefits: It would allow management
to
focus on propelling the value of the brand by allotting more resources
to
development of better products, improved quality control, shrewder marketing
practices — all resulting in better overall productivity, resource allocation,
and high returns on capital and free cash flow. Thus, the company should
be in
the franchising and real estate businesses for the cogent reason of maximizing
return on capital while concurrently minimizing cost of capital — a powerful
combination that would lead to creating value for all shareholders.
In
his
2005 annual report, Alan Gilman co-wrote, “We are also committed to accelerating
our franchise expansion efforts. In the next few years, we will test accelerated
franchising in existing markets.” As in many times in the past, the
rhetoric is impressive, but the factual record is flimsy:
|
Franchise
Units
(At
end of fiscal year)
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
| |
2001
|
2002
|
2003
|
2004
|
2005
|
2006
|
2007
|
| |
|
|
|
|
|
|
|
|
Total
Franchise Units
|
56
|
56
|
57
|
60
|
49
|
48
|
56
|
Source: As
Reported in SEC filings
Not
only
has the company under Mr. Gilman’s aegis failed to “accelerate” franchising, it
boasts almost the same number of outlets it franchised over a decade ago,
55 in
1997 as compared to 56 today. Mr. Gilman and the board must be held answerable
for their miscues and broken forecasts.
In
addition, a refranchising strategy (the process of selling existing company
restaurants to owner/operators) should be part of a longer-range plan.
Refranchising must be executed selectively, opportunistically, and over
time,
not in a pell-mell way. Because the company-owned store-level margins are
currently depressed, the valuations of others may reflect a significant
discount
to intrinsic value. Notwithstanding, we still would plan to explore the
option
of shifting underperforming stores in tertiary markets to more profit-focused
owners who can better develop and thereby amplify that market.
Undertaking
a growth strategy predicated only on franchising would result in substantial
free cash flow generation, which should be channeled to a share buyback.
The
efficient use of capital is another wellspring of value and part of our
plan in
maximizing shareholder net worth.
Share
Repurchases. The intrinsic value of Steak n Shake far exceeds its
current market value, and with the value-enhancing initiatives we propose,
the
price-to-value relationship would further improve. As a consequence, we
believe
that now is an opportune time to repurchase shares in order to reduce
the number of common stock outstanding, thereby aggrandizing the returns
to
long-term shareholders. For instance, a 20% reduction in the company’s shares at
a discount of 60% from intrinsic business value would produce a 15% gain
in
per-share value.
Whether
to reinvest in the business or to repurchase shares constitutes an important
capital allocation decision for the board and management. Current management’s
preference to open nine new restaurants (investing approximately $20 million)
instead of repurchasing shares is another marker of poor decision making.
Even
if we give management the benefit of the doubt that these projects would
be
value-creating — while historical evidence shows that they have been
value-destroying — with repurchases the return/risk ratio is still considerably
greater. The reason is simple: outlaying $1 in cash for an immediate $3
in
present value is a superior and safer move. Another benefit arises from
repurchasing: Management would concentrate on improving the 435 restaurants
already under its domain rather than seeking to enlarge the number of
company-owned outlets. Bettering the core operations of Steak n Shake,
in our
view, is the most fruitful avenue to increase the intrinsic value of the
firm.
Share
repurchasing is a classic example of our thinking concerning capital allocation.
As I wrote earlier, the company’s ten-year record demonstrates that for every
dollar the company has allotted to capital expenditures, such as opening
new
restaurants, less than a dollar was created for shareholders. Because we
believe
the value of the business surpasses the current stock price, every dollar
of
share buyback will translate into more than a dollar in market value. Because
our plan would result in generation of significant free cash flow, and
because
the company has a strong balance sheet, no other financial decision can
benefit
the per-share value of the firm more than share repurchases. When it comes
to
allocating capital rationally, all opportunities must be weighed against
each
other to ferret out the one that achieves the highest return for the risk.
We
would rather be sure of a moderate result than wait for a higher but dubious
one. We believe the board and management are not thinking clearly about
optimal
capital utilization, which is their most important task in creating
value.
Leadership
Changes Unavoidable. Stake n Shake lacks entrepreneurial
spirit. One of the most important decisions for the new board is to
select the right executive to lead the organization. In that regard we
need an
entrepreneurial CEO who will be relentless in fighting costs, who will
focus on
the customer by leading employees and franchisees to espouse a common standard
of quality, service, and cleanliness. The culture of the organization should
revolve around capitalizing on the mental prowess of entrepreneurs. The
chief
executive must know how to cultivate and manage other skilled entrepreneurs,
namely franchisees. Presently within Steak n Shake a bureaucratic corporate
setting exists, engendering an inflexible system that dampens individual
creativity. With the right leadership team, the company can become more
nimble
as it adheres to principles and practices placing a premium on individual
performance. The new CEO must provide a framework fostering change and
adaptation at a faster speed than the present.
We
need
leaders willing to instigate relentless grassroots searches for ways to
improve
operations. Our company must adapt the very sharpest ideas and practices
pervasive in the marketplace. Borrowing the most effective industry methods
is
essential to creating the most profitable restaurant chain. The company
must aim
to deliver value to the customer through best-in-class training, marketing,
menu, operation, and other customer appeals. Value is an important attraction
to
the consumer, particularly in the current economic environment. Board and
management must aspire to best-in-class customer metrics. Steak n Shake
will
continue to experience operational difficulties in an environment of rising
commodity, energy, and other costs if strenuous efforts are not undertaken
to
drive traffic to its outlets. Aggressive price increases to mitigate Steak
n
Shake’s declining customer traffic is not the silver bullet to improve
store-level operating margins.
Compensation.
We believe in a compensation program that rewards performance.
We think
that pay-for-performance best aligns the interests of management with those
of
the shareholders. In our assessment, the variable element of the compensation
package should be tied to the executives’ ability to generate free cash flow and
to earn a high return on invested capital. Higher performance should
result in higher pay.
Furthermore,
we do not believe that the current structure of the stock option program
is
equitable to the shareholders. To be structured correctly requires at the
very
least that the strike price would escalate at a rate equivalent to a minimum
expected return to shareholders. Capital carries a cost — explicit or implicit —
and simply to ignore the costs can lead to repercussions such as overemphasizing
retention of earnings and managing short-term accounting numbers. The current
compensation arrangement is askew, so that even if the company performs
below
its competitors, management
and directors will stand to gain. And if the company’s stock declines,
management and directors do not share in the downside.
As
a director of The Steak n Shake Company, I
will forgo receiving any stock options.
Corporate
Governance. We do not believe that the board should be filled with
former Steak n Shake CEOs. Many executives whom we could hire as CEO do
not want
to work for a board filled with former CEOs. The understandable reason
is that
the new CEO would be reluctant to debate candidly about alterations in
strategy
or in the organization while facing predecessors who emotionally are committed
to their own previous actions.
Alan
Gilman, now Chairman and Interim CEO, previously served as CEO from 1992
to
2004, after which he retained only his title of Chairman. Because he was
not
technically independent (as defined by SEC rules), the board assigned James
Williamson as Lead Director. Sadly, Mr. Williamson was also a former Steak
n
Shake CEO — from 1985 to 1990. In addition to functioning as Lead Director,
Williamson fills the position of Chairman of the Executive Committee as
well as
Chairman of the Compensation Committee. A lead director’s primary duty is to
convene and direct meetings of independent directors. Unfortunately, we
do not think Mr. Williamson is independent, either. He may be technically
independent, but we do not believe as a former CEO he is psychologically
independent, a mindset which to us is more meaningful.
We
plan
to replace Messrs. Gilman and Williamson, for we think both have stumbled
badly
in their responsibility to create value for shareholders and fear that
the
prospect of their properly serving us as stewards of our capital is dubious.
Moreover, during their tenure the board has added members with whom they
continue to maintain social and personal relationships, an affinity which
inevitably can impair objectivity and sound business judgment. Simply put,
we
believe Messrs. Gilman and Williamson have set the wrong tone at the
top.
When
we
first set out to effect positive change, we sought to replace only Messrs.
Gilman and Williamson at the next annual meeting. This transition in the
board’s
makeup will continue to be a major objective. However, because of the
deterioration of operating performance created by managerial missteps since
our
initial announcement, we have grown deeply concerned about the future of
the
company. By now we are sufficiently alarmed to conclude that the greatest
risk
shareholders face is keeping the majority of the current directors in place.
To
avert what we foresee as the continuing decline in company value, after
replacing Gilman and Williamson, we plan to call a special shareholders’ meeting
to replace the majority of the other directors. We’re not interested in losing
more money as a result of a weak board that requires consultants to direct
their
decisions. We would have liked to replace the majority of the board at
the
annual meeting. However, the firm’s bylaws prevent such an expeditious
move.
We
are in
the process of discussing board representation with knowledgeable parties
to
present at the special meeting. Our slate of largely independent directors
will
be chosen on the basis of their self-reliance, commitment, shareholder
orientation, and relevant business experience. You will find that each
nominee
will be in a superior position to that of the incumbents in serving the
shareholders’ interests. We believe the board should be no fewer than five
members and no more than seven, large enough to function effectively by
carrying
out all the required tasks but not so large that it leads to group
ineffectiveness.
Financial
Transparency.
The company must be more forthright about its business. When we
met
with Alan Gilman and CFO Jeffrey Blade on August 13, 2007, they refused
to
disclose basic information. For example, they rebuffed disclosure of even
niggling details like the number of employees at headquarters. In
addition, Messrs. Gilman and Blade were unwilling to provide same-store
sales
growth of franchised restaurants so we could compare them with company-operated
restaurants. These performance figures would, of course, be useful in assessing
the overall performance of the brand and, ultimately, the performance of
the
company. Gilman and Blade simply stated that they would take these two
questions
“under advisement.” We are suspect of management when it takes the low road of
withholding basic, reasonable, non-competitive information from the owners
when
competitors reveal the same data. In contrast, we would work diligently
to
change the policies surrounding financial transparency so shareholders
would be
treated the way they should be, like partners who are knowledgeable about
their
business’ operations.
Steak
n Shake’s Stock Price. Regrettably, shareholder
returns have been dreadful during any reasonable holding period. If you
purchased the stock at virtually any time in the last decade you would
not need
professional assistance to pinpoint that you did poorly. Below is a comparison
of Steak n Shake to the restaurant industry, as measured by S&P Restaurant
Index:
|
Relative
Shareholder Returns
|
| |
Total
Shareholder Returns
|
| |
10–year
|
5-Year
|
3-Year
|
| |
|
|
|
|
Steak
n Shake
|
(38.9%)
|
(25.1%)
|
(15.2%)
|
|
S&P
Restaurant Index
|
202.3%
|
178.5%
|
41.4%
|
Note:
All share prices used to calculate Total Shareholders Returns throughout
the
paper are as of January 15, 2008. Source: Research Data
Group
We
believe the stock of The Steak n Shake Company is significantly undervalued.
The
undervaluation is largely an offshoot of a combination of strategic,
operational, and governance factors. The brand has tremendous value since
it has
demonstrated a consistent ability to generate healthy cash inflows. In
addition,
the real estate is a source of great value. The right leadership in the
boardroom along with the right management team could dispel the problems
and
unlock the value inherent in the firm. However, with the current board
and
management, it is our view that the stock will continue to languish. The
time to
act is now and with a sense of urgency in the pursuit of restoring
value.
************
Improving
store-level profitability, growth through franchising, reduction of corporate
G&A, focus on generation of free cash flow, share repurchases,
pay-for-performance compensation, a more effective governance board, and
others
— these are departures we have in mind to inject verve into and to augment
the
value of the company. We have made a commitment to own the stock of Steak
n
Shake for the long haul, and our allegiance therefore is to the long-term
shareholders of the company. Our aim is to join the board and explore
all avenues to maximize shareholder value.
We
encourage you to share your views with us through our website at
www.enhancesteaknshake.com, which has been created to communicate with
you on
important and relevant matters regarding Steak n Shake.
While
we
are confident of winning, your vote is still very important to us. When
you
receive your proxy materials, we urge you to vote for our nominees and
withhold
your votes for Gilman and Williamson.
We
look
forward to serving you as stewards of your capital.
Sincerely,
/s/
Sardar
Biglari
Sardar
Biglari
************
CERTAIN
INFORMATION CONCERNING THE PARTICIPANTS
THIS
COMMUNICATION IS NOT A SOLICITATION OF A PROXY WHICH MAY BE DONE ONLY PURSUANT
TO A DEFINITIVE PROXY STATEMENT. STOCKHOLDERS ARE ADVISED TO READ THE PROXY
STATEMENT AND OTHER DOCUMENTS RELATED TO THE SOLICITATION OF PROXIES BY
THE LION
FUND, L.P. (“LION FUND”), BIGLARI CAPITAL CORP. (“BCC”), WESTERN SIZZLIN CORP.
(“WSC”), WESTERN ACQUISITIONS L.P. (“WAL”), WESTERN INVESTMENTS, INC. (“WII”),
SARDAR BIGLARI AND PHILIP L. COOLEY, FROM THE STOCKHOLDERS OF THE STEAK
N SHAKE
COMPANY, FOR USE AT ITS NEXT ANNUAL MEETING OF STOCKHOLDERS WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. WHEN COMPLETED,
A
DEFINITIVE PROXY STATEMENT AND A FORM OF PROXY WILL BE MAILED TO STOCKHOLDERS
OF
THE STEAK N SHAKE COMPANY AND WILL BE AVAILABLE AT NO CHARGE AT THE SECURITIES
AND EXCHANGE COMMISSION'S WEBSITE AT HTTP://WWW.SEC.GOV. IN ADDITION, COPIES
OF
THE PROXY STATEMENT AND OTHER DOCUMENTS WILL BE PROVIDED WITHOUT CHARGE
UPON
REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO OUR PROXY SOLICITOR,
MORROW
& CO., LLC AT ITS TOLL-FREE NUMBER (800) 607-0088. THE PARTICIPANTS IN THE
PROXY SOLICITATION ARE ANTICIPATED TO BE LION FUND, BCC, WSC, WAL, WII,
SARDAR
BIGLARI AND PHILIP L. COOLEY (THE “PARTICIPANTS”). INFORMATION REGARDING THE
PARTICIPANTS, INCLUDING THEIR DIRECT OR INDIRECT INTERESTS, BY SECURITY
HOLDINGS
OR OTHERWISE, IS CONTAINED IN THE SCHEDULE 13D FILED BY THEM WITH THE SECURITIES
AND EXCHANGE COMMISSION ON DECEMBER 27, 2007 WITH RESPECT
TO THE STEAK N SHAKE COMPANY, AS AMENDED. THAT SCHEDULE 13D, AS AMENDED,
IS
CURRENTLY AVAILABLE AT NO CHARGE ON THE SECURITIES AND EXCHANGE COMMISSION'S
WEBSITE AT HTTP://WWW.SEC.GOV. AS OF JANUARY 23, 2008, EACH OF THE PARTICIPANTS
MAY BE DEEMED TO BENEFICIALLY OWN 2,423,945 SHARES OF COMMON STOCK OF THE
STEAK
N SHAKE COMPANY, CONSISTING OF THE FOLLOWING: (1) 941,200 SHARES HELD DIRECTLY
BY LION FUND, (2) 1,467,445 SHARES HELD DIRECTLY BY WAL, (3) 12,300 SHARES
HELD
DIRECTLY BY PHILIP L. COOLEY, (4) 3,000 SHARES HELD DIRECTLY BY PHILIP
L.
COOLEY'S SPOUSE. EACH OF THE PARTICIPANTS DISCLAIMS BENEFICIAL OWNERSHIP
OF SUCH
SHARES EXCEPT TO THE EXTENT OF HIS/ITS PECUNIARY INTEREST
THEREIN.
Contact:
Thomas
Ball
Morrow
& Co., LLC
(203)
658-9400
Or
Robyn
B.
Mabe, Chief Financial Officer
Western
Sizzlin Corporation
(540)
345-3195